Revenue Metrics
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Annual Recurring Revenue (ARR)

Annual Recurring Revenue, or ARR, equals MRR multiplied by 12. It represents the annualized value of subscription revenue and is the standard growth metric for B2B SaaS. Seed-stage companies typically target $1M ARR, Series A targets $5M, and Series B targets $20M or more.

Why ARR Matters

ARR is the lingua franca of SaaS valuation. Revenue multiples, growth benchmarks, and funding milestones are all expressed in ARR terms. Crossing $1M ARR, $10M ARR, and $100M ARR are recognized inflection points that unlock different investor classes and valuation tiers. ARR also smooths out monthly noise, making it easier to spot long-term trends.

How to Calculate ARR

Multiply your current MRR by 12. ARR should only include recurring revenue — exclude professional services, one-time implementation fees, and variable usage charges unless contracted.

ARR Formula
ARR = MRR × 12

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Annual Recurring Revenue
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Industry Benchmarks

SegmentGoodAveragePoor
Seed-stage SaaS>$1M$300K–$1M<$300K
Series A SaaS>$5M$1M–$5M<$1M
Series B SaaS>$20M$5M–$20M<$5M
Growth-stage SaaS>$50M$20M–$50M<$20M

Expert Tips

Use ARR for annual planning and investor communication, but use MRR for operational decisions. ARR smooths over monthly dynamics you need to see.

Only count contracted recurring revenue. Pipeline, trials, and usage estimates should not be included in ARR.

Track net new ARR per quarter as your primary growth metric once past $1M ARR. It shows absolute growth momentum better than percentage growth rates at scale.

ARR milestones ($1M, $5M, $10M, $100M) correlate with specific operational challenges — hiring, process, and go-to-market shifts. Use them as planning triggers.

Frequently Asked Questions

What is ARR in SaaS?
ARR (Annual Recurring Revenue) is the annualized value of your recurring subscription revenue, calculated as MRR × 12. It's the standard metric for B2B SaaS companies to communicate business scale, set valuation benchmarks, and plan annual budgets.
When should I use ARR vs MRR?
Use MRR for operational decisions, monthly tracking, and identifying trends. Use ARR for investor communication, annual planning, valuation discussions, and comparing against industry benchmarks. Most B2B SaaS companies report ARR externally and track MRR internally.
What is a good ARR growth rate?
The T2D3 benchmark suggests tripling ARR twice, then doubling three times. At $1M ARR, 200% year-over-year growth is strong. At $10M ARR, 100% is strong. At $50M+, 50%+ is considered top-quartile growth.
Does ARR include one-time revenue?
No. ARR should only include recurring subscription revenue. One-time fees like setup charges, professional services, and hardware sales should be excluded to keep ARR a clean measure of recurring revenue.

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Business Models Using ARR

ARR is a key metric for these business types. Click any model to see how Revenue Map calculates it automatically.

SaaS B2B
FinTech
HealthTech
EdTech
AI / ML

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